As Covid-19 cases dip, real estate sector shows signs of bouncing back in 2022

After touching the nadir in mid-2020, following the Covid-19 pandemic and the stringent lockdowns, the country’s real estate sector has bounced back in 2022, in spite of global uncertainties. Data from leading industry researchers show, with demand for residential homes continuing to remain steady, unsold inventory in the housing market is declining fast.

While in the commercial sector, steady inflow of private equity (PE) investments indicate confidence that the investors have on the local market. As per data from Anarock Property Consultants, unsold inventory in the affordable housing market has shrunk by nearly 21 per cent since the Covid-19 pandemic hit shores.

From 234,600 unsold units at the end of March, 2020 that were available for homebuyers, the number has fallen to 186,150 units by March this year. According to Anuj Puri, Chairman, Anarock Group, “This is the highest supply reduction among all budget categories – clearly reflecting an enduring demand for affordable homes.”

The ultra-luxury homes (priced above Rs 2.5 crore) segment also fared well, reporting a 5.4 per cent decline in supply across the top seven cities in the last one year. This, despite the addition of significant new supply to address surging demand for ultra-luxury homes in the pandemic. Mumbai and Kolkata saw the highest inventory reduction of 16 per cent and 15 per cent, respectively.

Realtors are in concurrence. Leading players like Raheja Developers, Hiranandani Group, Gulshan Group and Signature Global, among others, are witnessing steady surge in demand for residential homes for the past few quarters.

According to Niranjan Hiranandani, co-founder & Managing Director of Hiranandani Group and Vice Chairman of the self-regulatory industry body National Real Estate Development Council (NAREDCO), the residential market is finally getting its mojo back after suffering from subdued demand for nearly a decade. He expects this trend to continue, in spite of rising costs.

“The Covid pandemic and the work from home culture arrived as a blessing in disguise for the industry. People realised that they need their own homes which provides security during uncertain times, unlike a rented apartment. This pushed the fence-sitters into the market again. We are witnessing record demand for not only affordable homes but also larger units and builder floors”, Pradeep Aggarwal, founder and Chairman of affordable housing major Signature Global and Chairman of ASSOCHAM National Council on Real Estate, Housing & Urban Development told Business Today.

According to Nayan Raheja, director at Delhi-based Raheja Developers, demand for luxury homes is encoring them to launch new projects in Gurugram in 2022.

In the commercial space, PE investments continue to grow on relatively large base. Data from Knight Frank shows, in 2021 some $2.9 billion worth of PE funds reached the office space market - up from $2.5 billion in 2020 - 15 per cent higher. While in the retail market it jumped by 271 per cent to $ 817 million from $220 million in 2020. 

Warehousing, that has been under the focus for last few years since the emergence of e-commerce, attracted $1.31 billion worth of PE funds in 2021 - 55 per cent higher year-on-year. In residential segment, given the surge in demand for homes, PE investments more than tripled to $1.2 billion last year from $368 million.

“While investors’ appetite remained strong across various real estate asset classes in 2021, escalating global tensions emanating from Russia-Ukraine war and the influence of omicron in the early part of the year were seen inhibiting investment. Moving forward, push for infrastructure spending will accelerate investments in the next three quarters of the year 2022 to levels witnessed prior to the pandemic with estimated investments touching $6.8 billion”, said Shishir Baijal, Chairman & Managing Director, Knight Frank India.